Buffett Says Don’t Worry Too Much

What does the Oracle of Omaha now have to say about the housing market? "Within a year or so residential housing problems should largely be behind us, the exceptions being only high-value houses and those in certain localities where overbuilding was particularly egregious," Warren Buffett noted in his letter to Bershire Hathaway shareholders on Friday.

March 1, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user Ethan Bloch

What does the Oracle of Omaha now have to say about the housing market? “Within a year or so residential housing problems should largely be behind us, the exceptions being only high-value houses and those in certain localities where overbuilding was particularly egregious,” Warren Buffett noted in his letter to Bershire Hathaway shareholders on Friday.

He didn’t name any names when it came to “egregious” housing markets, but it doesn’t take much imagination to believe he meant certain well-known underwater markets, such as that city in the desert known for its entertainment industry.

Buffett continued, re housing: “Prices will remain far below ‘bubble’ levels, of course, but for every seller (or lender) hurt by this there will be a buyer who benefits. Indeed, many families that couldn’t afford to buy an appropriate home a few years ago now find it well within their means because the bubble burst.”

FDIC to Unload More RE Loans

The Federal Deposit Insurance Corp. is looking to unload more distressed real estate loans that it acquired from such failures as IndyMac Bank, New Frontier Bank and Silverston Bank. Toward that end, the agency is seeking bidders through Mission Capital Advisors for 815 seriously problematic loans (most are 90 days or more past due) totaling about $610 million.

The majority of the loans are residential acquisition, development and construction loans. All of the loans were originated in 2006, with fully a third of them tied to properties in Colorado, and with other concentrations in California and Utah.

This is the latest in a series of auctions of bad real estate loans by the FDIC; all together the agency has sold off $14.8 billion of such loans thus far, and more auctions are on the way. With some 702 banks on the FDIC’s “problem bank” list, the agency’s probably going to have a lot of real estate loans to deal with for many more years.

CalPERS Multifamily Investment to be Restricted?

A bill has been introduced in the California State Assembly that would ban the state’s behemoth public pension funds from “predatory investment practices” in certain multifamily properties. Between them, the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) are major multifamily property investors in the state and elsewhere.

The “predatory investment practices” that the bill’s sponsor, Assembly Member Tom Ammiano, has in mind are investments in rent-stabilized properties with a goal of raising rents precipitously anyway. CalPERS was an investor in properties in East Palo Atlo in which this reportedly happened, though that deal later collapsed for other reasons (if that scenario sounds familiar, CalPERS was also an investor in Peter Cooper Village and Stuyvesant Town in New York City).

According to the bill, “It is in the public’s interest to enact legislation to prohibit investment of retirement funds in companies engaged in… predatory investment practices that result in excessive rent increases imposed upon, or the eviction or displacement of, persons residing in rent-regulated housing.”

Wall Street gained ground in a very small way on Friday, with the Dow Jones Industrial Average up 4.23 points, or 0.04 percent. The S&P 500 gained a little more, up 0.14 percent, and the Nasdaq was up 0.18 percent.